Ornua prepared for dairy surge

Ray Ryan learns why newly rebranded Ornua is optimistic about the future for Irish dairy exports across a range of expanding markets.
Ornua prepared for dairy surge

MANY years ago, one very wise old newspaper editor gave one of his reporters a bit of advice on writing about the dairy industry.

“Never forget,” he said, “that the bottom line is always the price farmers are paid for every gallon of milk they supply to their co-ops.”

That advice is as relevant as ever today as the industry prepares for a new era of increasing supplies, growth opportunty and challenging price volatility.

Ornua, the largest exporter of Irish dairy products, is the new name of the Irish Dairy Board, which began life 54 years ago as An Bord Bainne.

A co-operative with a turnover of €2.3bn, it is responsible for exporting about 60% of Ireland’s dairy products to more than 110 countries and had an operating surplus of €30.3m in 2014, a 17% increase on the previous year.

It also owns the iconic Kerrygold brand, which is synonymous for quality butter, cheese, and milk powders.

Ornua’s mission is to open and develop valuable global markets for dairy products and, in so doing, deliver strong returns to its 17,000 farmer shareholders.

Thisnoble goal is being achieved by a team of more than 3,000 staff working in Ireland and across 19 subsidiaries and in-market teams from Algiers to Beijing and from Lagos to Moscow.

The drive to secure new high-value outlets has seen the business make significant investments in the US, Germany, Britain, Saudi Arabia, and, most recently, in Spain.

Over the past 18 months, it has invested over €200m in growing brands, innovation and in opening new production facilities and offices around the world.

Currently, it is building a Centre of Excellence for Kerrygold butter production and packing next to the Dairygold Co-op complex in Mitchelstown, Co Cork.

The €3m facility, which is due to start production next May, will ensure a world-class supply chain to meet the evolving needs of Kerrygold customers and consumers world wide.

It will also create 50 jobs, in addition to those involved in the construction work and is poised to become the global home of the Kerrygold brand. The company has been steadily moving to position itself so that it is ready to exploit the new opportunities that are arising following the abolition of EU milk quotas.

However, the feedback from an in-depth review of its corporate identity suggested that the name Irish Dairy Board sounded staid and institutional.

As part of the process of transforming the business, the board voted earlier this year to change its name to Ornua, which comes from the Irish for gold, ór, and new, nua.

The change, which will not affect the board’s corporate structure or brand names, became official on the eve of the lifting of EU milk quotas in April.

Ornua serves consumer food markets through wholly owned subsidiaries in Britain, the US, Germany, the Middle East, China, and Russia and by locally based distributors and agents in other key regions.

Operating out of Ireland, the co-op’s dairy trading and ingredients division is responsible for the procurement of Irish dairy products and for the sale of dairy ingredients to end users. It is supported by key subsidiaries in Britain, Spain, Saudi Arabia and the US.

Another important part of the business is DPI, the third largest speciality food distributor in the US, where it has four strategically located centres.

China is also becoming an increasingly important market for Ornua.

It sells the full range of Kerrygold cheeses and butters to more than 1,000 retail outlets across 50 cities in China, Hong Zong, Malaysia, and Signapore.

And, in another exciting new development, Kerrygold Whole Milk is now being sold through major Chinese retailers, regional shopping networks and e-commerce retailers.

China’s growing liquid milk market is estimated to be worth €18bn. More than 11bn litres of liquid milk are consumed in China each year, compared with just 670 m litres in Ireland.

This market segment for premium imported product is estimated to include more than 186m households in China.

Meanwhile, Kerrygold Irish Cream Liqueur, a blend of natural Irish cream, aged Irish whiskey, and luxurious chocolate, has been launched in the US.

In the market places, Kerrygold is the number one butter brand in Germany and the number one imported butter in the US.

Overall, the co-op, headed by chairman Aaron Forde, had a good set of results for 2014 and looks set for another strong performance in 2015 with results significantly better than last year.

Chief executive Kevin Lane said that Ornua has completed the transformation of the business. It has decent profits and is growing nicely with a strong balance sheet and low levels of debt. And it is poised for the next phase of fairly strong growth.

He said there is a confidence in the business and a strong belief that it can give sustainable long term results to Irish dairy farmers. But there will be bumps on the road.

One of those bumps will be in 2015. Milk prices will probably be badly affected in the next six months.

“The better farmers and the better processors will have to be able to manage their business with that volatility because it is going to be there and it is ever more pronounced,” said Mr Lane.

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